ZIMBABWE Stock Exchange-listed Hippo Valley says it lost part of its market share after the government suspended duty on basic commodities to cushion consumers from expensive locally produced goods.
PRISCA TSHUMA
High inflation and a weakening Zimbabwe dollar prompted the authorities to ease import requirements, resulting in nearly 20 sugar brands flooding the country.
In May last year, the ministry of Finance and Economic Development promulgated Statutory Instrument 98 of 2022, which suspended the payment of duty on basic commodities including sugar, flour, cooking oil and other basics.
This implied that the listed basics could be imported by anyone without the need for import permits or licences for the six months ended November 2022.
In a statement accompanying the financials for the full year to 31 March, company chairperson Canaan Dube said the imported brands traded at low prices, as they had no production costs and were exempt from regulations that local sugar companies must comply with.
“World sugar markets often trade below global costs of production, meaning that imported sugar has an unfair price advantage over sugar produced locally in Zimbabwe where production costs are relatively higher,” he said.
“In addition, some of sugar imported did not comply with the Labelling and Vitamin A fortification regulations, which would have formed part of the costs of locally produced sugar.”
As a result the company’s share of total industry sugar sales declined from 394 000 tonnes recorded in 2022 to 381 820 tonnes for the year ended 31 March 2023.
The total industry sugar sales volume into the domestic market also suffered a blow at 338 059 tonnes from 356 253 tonnes, which was 5% below prior year because of competition from low-cost imports.
Industry export sales however increased by 15% to 43 760 tonnes from 38 000 tonnes following an improvement of export volumes to the United States to 17 751 tonnes in 2023 compared to 13 087 tonnes in 2022.
Nevertheless, the company recorded 30% revenue growth in inflation-adjusted terms to ZW$139 billion, from ZW$102 billion recorded in 2022 on the back of price adjustments in response to increasing cost pressures, amplified by currency dynamics.
Resultantly, operating profit and profit for the year grew by 22% to ZW$24 billion from ZW$22 billion in the prior year and by 24% to ZW$17 billion from ZW$14 billion in 2022 respectively, with most of the growth attributable to changes in the value of biological assets.
Going forward, Dube projects continued pressure from imported goods coupled with a volatile and hyperinflationary operating environment in the short to medium term.
“With the recently introduced Statutory Instrument 80 of 2023 allowing duty free importation of several commodities including sugar, the sugar industry faces huge pressure to compete against imports coming from competitors operating in stable and subsidized environments,” he said.
Finance minister Mthuli Ncube gazetted Statutory Instrument 80 of 2023 last month, which exempted a list of 14 basic commodities from customs duty payment on importation for the next six months. This followed a cabinet decision to suspend import duty on some essential goods in a move intended to counter continued price increases by retailers in the country.
With the value of Zimbabwe’s currency falling dramatically by the day, prices are rising and markets are demanding US dollars for goods and services. To tame the inflation, the government continues to set up policies that favour the use of the Zimbabwe dollar to avoid dollarisation.
